tv [untitled] February 15, 2011 7:00pm-7:30pm EST
forces in an anti terror operation in the country's troubled northern caucasus region three policemen also died in the gun battle in the photographer region while two offices were. twin suicide belongs to the russians republic of kyrgyzstan. and hold a line between downing street and the kremlin the one of the outcomes of the meeting between russia's foreign minister and his british counterpart of the one of the it hopes to. prove mundane relations which of coolness and the death of former federal security service agent at xander london in two thousand and six. and while several european national leaders say multiculturalism has failed and austria activists has been tried and found guilty people saying the same thing about criticism of muslims and their religion and this comes as new migrants believe that troubled countries in search of stability and security into europe is the headlines now the kind of report in which finance guru marx kaiser and co-host of hobbit talk about saudi oil reserves and investors states.
guys are and this is the kaiser report i bet you're thinking about taking your shoe off right now and throwing it at somebody well there's an index for that stacy herbert you knew my first headline the shoe thrower is index this is from the economist and they're trying to come up with an index that will help them gauge where the next jasmine type revolution might happen as you see from the chart yemen is the number one location in the middle east libya number two three is egypt which is kind of bizarre since they are in the middle of a revolution and where in the list is saudi arabia because i think they're on really ripe to explode in civil unrest and revolution i'd like to see
a revolution in saudi arabia was that one right well there are number eight but the shoe throwing has already started in saudi arabia and it's coming from an unlikely place if you look at this next headline report saudis warned obama not to humiliate mubarak so king abdullah basically threw it to barack obama on a telephone call the twenty ninth of january where king abdullah reportedly told president obama not to humiliate mubarak and warned that he would step in to bankroll egypt if the u.s. withdrew its aid program worth one point five billion annually bankrolled with money he made from selling gasoline to obama's consistency and in the us exactly but the only reason why he his family his kingdom is able to be worth a trillion dollars that's because the us military obama is the commander in chief of the us military they secure those oil rights for this elite group of seven
thousand princes and princesses who defraud the rest of their. lation yeah he's obsequious i don't know why i mean we thought it was just like a little bit of awkward in this or any browser from a king chorus why is he doing this now we know that obama is really you know court jester to king abdulla well after this phone call that took place between obama and king abdullah where king abdullah threw his verbal shoe at obama the next headline reads saudi arabia's king abdullah passed away this is proof is in the islamic paper and apparently after the phone call sources stated that king abdullah was furious and then suffered a sudden heart attack doctors ran to his rescue but were unable to save him he was pronounced dead but his death was not reported due to the sensitive conditions that exist in the region the saudi arabian government will reject this claim but the ball is in their court to prove he is the law no it was just
a little gas. and oil but it could be you know a planted headline that this is like you throw too many shoes at us king abdullah king you know this is the headline that you will be reading you're going to die of a sudden heart attack it could be you falling from a plane you know thirty thousand feet in the air who knows you're going to die some way what a stroppy little drama queen that king abdullah. he was like a character in that t.v. show i'm having a heart attack like fred sanford from sanford is. going to lose a blue king abdullah so saudi arabia is number eight on this shoe throwing index but this next headlines from week wiki leaks might suggest it should be a little bit higher up wiki leaks cables saudi arabia cannot pump enough oil to keep a lid on prices a u.s. diplomat convinced by saudi expert that reserves of the world's biggest oil exporter have been overstated by nearly forty percent or by three hundred billion
barrels of oil now that line their line about there on the ground we've been saying that for years they haven't audited from the outside anyway the oil production all the big major fields are in rapid decline saudi arabia is saying oh no we don't have any problems so opec is effectively dead they cannot lower the price of oil anymore by flooding it the market with oil because if it peak oil two thousand and seven global peak oil so now that whole foundation of power for saudi arabia is being taken away from the big sheikhdoms and all the princes and there are thousands of these frickin princes all over the world there take a minute billions to keep these guys rolling around in their rolls royces for what so they can sell overpriced gas to american s.u.v. drivers well that's all over with you got to get real jobs now guys i suggest you apply them at your local mcdonald's with this information transmitted in this wiki leaks cable took place in november two thousand and seven when sadat husseini
a geologist and former head. of exploration at the saudi oil monopoly around co he met with a u.s. diplomat so this was during the bush administration remember when cheney kept on dick cheney kept on flying over there to saudi arabia and set out all hussein he told them that iran twelve point five million barrel a day capacity needed to keep a lid on prices could not be reached yet they don't have the oil to pump now this is going to be interesting going forward because america doesn't have the money to buy higher priced oil china however does because china has all of america's money they've got three trillion dollars in reserves so they can afford to pay up for oil and gas the u.s. so ever cannot so this is part of the dynamics and of course the saudis who have been america's good buddy friend for years will start you know entertaining hu jintao more often and obama and the whole white house gang will be in the short bus trying to make their way down to the coast for a little r. and r. because they're flicked in on a ploy well i have another chart here to show you that the u.s.
is not looking for a solution to this problem of saudi arabia running out of oil are indeed spending as share of sales so this is for the u.s. corporations you see over on the left of this chart the pharmaceuticals spend eighteen point seven percent all the way on the right devon the very bottom energy spends less than point three percent on research and development and this includes research into conventional fuel such as ultra deep water drilling in new oil refining techniques so they are not looking for any other solution for our energy crisis coming up not because there's no more oil to find there's no more big fields to find and they you know they can find some oil trapped under four or five miles of rock and salt in the middle of an ocean somewhere but the cost of taking it out is exorbitant and completely impractical or the tar sands in canada it's completely impractical there's no price point that makes sense to take oil out of the tar
sands of canada cost more energy. get that oil out than you can energy burning it once you've gotten it out so the whole dynamics of fossil fuel burning is finished the entire globe runs on fossil fuel and therefore the peak credit that we saw in two thousand and seven combined with peak oil that also occurred in two thousand and seven mean that we've hit peak globalization which means that populations around the world where those cairo tuners asons double in america london everyone's revolting because we've gone from a positive sum game of a currency to a negative sum game of a lack of currency and so you see in the middle east all these dictators are fleeing with the wealth of the nation they're already like taking it out while these revolutions in the shoe throwing revolutions are our building but let's look over into the west and see where we're seeing the same thing in egypt so omar suleiman is another dictator in waiting for mubarak here in the west we have our financial dictators and look at these headlines senior lib dems sacked for
criticising controversial deal for bankers so this is a weird banking deal that george osborne and the tory lib dems coalition created project merlin and under the deal with industry the heads of the taxpayer backed high street banks will receive multiroom million pound pay and bonus packages for last year the chancellor said it was time to move from retribution to recovery and agreed to water down walls which would have identified multimillion pound bank traders however under the terms of the project merlin the country's main high street banks have agreed to increase lending and provide funding for community projects in return for the government not vetoing their bonus programs well it's a classic hostage situation the banks the government hostage for ransom the u.k.
government has negotiated in a ps. with terrorists this is a two to two year strategy they call terrorists who fundamentalist radical psychopaths who bomb buses or take down buildings they won't talk to them but when barclays or h.s.b.c. or h. boss or royal bank of scotland or allied irish bank in the in ireland when they come into the government and talk with these people they serve them see their worst terrorists they kill more people and they have more casualties i mean we're talking to sean fitzpatrick angle irish bank for example he's up there with the worst terrorists of the last one hundred years you got to put him up there was hitler and now when stalin shown fitzpatrick max you speak of the irish bankers there in my final headline here ireland's lenahan wants senior bank debt discounts so irish finance minister brian lenihan said the government is pressing for
a substantial discount on twenty billion euros of unsecured senior bank bonds a push that is being resisted by the european central bank. president of the e.c.b. said that i really need to press ahead with this fiscal austerity and imposing haircuts on investors is not part of the plan right day the bond investors are to be made whole for committing acts of financial terrorism the irish government is in the pocket of the financial terrorists i mean imagine during the days of the ira for example of margaret thatcher came out and was caught in bed with bobby sands i mean that would have been a scandal right here you have the government of ireland in bed with the bankers who committed these troops as these agree just acts of mayhem and wickedness and they're all sit around smoking a cigarette having had a lot of the law a good time totally destroying the economy it's unbelievable but the other thing is
important to connect this to the. at least what's going on there democracy is not an option though the rulers of the world will not allow democracy there if they have their way the same thing in the west where they will not allow capitalism to happen to the elite in the west the same that they will not allowed to mock or see to happen to the oligarchs of the middle east so you see that in john cloud tree shay's statement there that haircuts on investors isn't part of the plan is not part of the plan ever for the west we will not allow bankers to suffer from capitalism right capitalism would have both rewards and risks and their version of capitalism is all reward for a few and no risk for a few all the rest of the society a sorbs full of the risk it's a catch a stocker see in ireland rule by the least qualified the prefix of course kaka from the latin and french measured all right so stacy herbert thanks so much for being once again with us here on the trial is
a report thank you max don't go away because when we come back there's plenty more coming your way. knowing. the oil up to. her. mum. mum. mum. mum on the enemy. this is true still keeps its secrets the denounced times in the field limbo soviet farms nikita khrushchev's to lighten the moment on obsolete.
welcome back to the kaiser report time now to go back to new york city and talk with barry ritholtz money manager author of bailout nation and the man behind the extremely popular website ritholtz dot com also called the big picture barry ritholtz welcome back to the kaiser report thanks for having me max it's always a pleasure to come by let's start with what you wrote the washington post recently it says why politics in investments don't mix talk to us about this i'm talking about economists and fund managers and traders who all allow their partisan political bias to affect their investing and it turns out this operates for the
worse of the two examples i used in two thousand and three after the bush massive unfunded tax cuts at the same time they they were taking place greenspan and taken rates down to one percent and all my pals on the on the left had said this is going to be a giveaway to the rich it's not going to create jobs it's a budget buster and all those things are true but it's sort of like a surgeon going into the operating theatre you have to you know hold all your biases to the side and be completely objective if you look at the market back then was pretty clear this was an overwhelming amount of liquidity and it was going to goose the market the other side of that was six years later march march of zero nine. congress had waived the fast be one fifty seven rules which allowed banks at that point to then hide losses they didn't have to report mark to market loans
anymore you had the market as oversold it's ever been the fed had taken rates down to zero percent on average when you see a down fifty five percent market in such a short period of time tends to mean that there's a big snap back rally coming and when we discuss this with our colleagues and traders and friends. as the guys on the right this time said well that obama's he's a muslim he's a socialist he's born in kenya he's going to destroy the market in fact the day the market low michael boskone had an editorial out in the wall street journal saying obama's going to strongly absolutely destroy this market over the next couple of years and as we know the market's up almost one hundred percent since then so the idea was to tell people hey whatever your partisan politics might be leaving in the voting booth when it comes to voting you have to think more objective all right well this brings up the subject of self-interest and how this plays out in the markets but my question to you barry is that when you have
a market like you do in the states that is dominated by exchanges that are increasingly becoming a question in terms of their integrity themselves the very market making integrity of the free market capital system is coming coming under attack as people are questioning things like high frequency trading program trading market manipulation and so what about the market itself barry it seems to be completely corrupt in that there is the price discovery any more it's all manipulation at this point what about this barry how are we going to stall this problem when you say the markets integrity is questioned i disagree with you i don't think there's any question at all the markets were once nonprofit organizations run for the benefit of investors and the people that work there and actually traded there and now it's a for profit operation that basically is willing to sell their souls out to the highest bidder so all these colocated servers that hedge funds are putting addicts
the exchanges and all of the get a millisecond advantage over everybody else it gives them the ability to sniff orders before they go to the market to flaunt run investors these guys are literally pulling billions and billions of dollars out and that profit doesn't come out of thin air that profit comes from the actual investing public who is forced to. we have a fire alarm so the problem here is honestly did go on these people are stealing money from the investing public and it's really a great tragedy blame dick grasso for causing this all there you are contradicting yourself you start off by saying we have no problem with these markets then you describe to me a way of front running on high frequency trading that's stealing so which is it are the markets corrupt max i'm not saying we have no problem i'm saying you raise that as a question i said it's beyond any doubt there is no question the markets have been corrupted this is this is not an issue for debate this is the world isn't flat once
they went forth to become for profit entities all bets were off and the investor was thrown under the bus so you and i are completely in agreement about this i'm just saying this isn't a debate there is no question the markets have corrupted themselves let's move on to we talked a little bit about earlier i just looked at the piece myself you can fill me in on the details of what is going on the bank dividends issue can you give us the broad strokes here and tell us what your thoughts are i'm astonished that given how subsidized the banks currently are and how much they're a notch away from life support i'm amazed that anyone has the colossal. honeys for lack of a better word to say hey we should let the banks started showing dividends when you look at their actual state currently they're artificially propped up in the united states with zero percent interest rates they were rescued from the brink of
disaster with emergency taxpayer loans we've allowed them to hide their losses so what looks like profitable companies are in reality either insolvent or pretty close to insolvent we've allowed the banks to turn the c's fannie and freddie into their dumping ground for bad mortgages all the big banks and some of the mid-size banks are taking mortgages that should be. discounted thirty forty fifty percent or more and they're selling them for near parts of fannie and freddie so they're taking bad loans and dumping them off on the public it's a classic example of privatized gains and socialize losses then you take the artificially steep in yield curve it's hard for anyone with a straight face to say yeah these banks are in great financial health they're standing on their own there's no government subsidy there's no taxpayer support let's allow them to write big dividends though the whole conceit is just based on
a fantasy these banks in my opinion should have been put through a prepackaged bankruptcy should have come out of the bankruptcy with the bad debt sold off the pennies on the dollar with taxpayers owning the bulk of them and eventually spun out recapitalized and better health but we didn't go that route we're allowing them to slowly recapitalize by borrowing from the fed and zero in lending to the treasury at three and a half percent and that process is probably half way through to even suggest that a dividend is appropriate at this time i don't know what the hell's in the water with some of these people are coming up with this stuff but it's the height of absurdity right so that the government subsidizing the banks and say we now want to pay dividends for our shareholders or the government can just use their influence to raise interest rates to give people a genuine return on their savings in a government bond so they're forcing people to buy the stock of a bank that's been proven to be malicious to get any kind of a return on
a dividend payout and these are banks that are taking money from the government when the government and the fed can simply just raise rates and give people a genuine rate on their on the government bond so it's a very securitas way to get people to get a in any kind of rate of return on their savings by participating in the wholesale thieving as you point out in your book bailout nation and other books so once again it seems that the banks have a gun to the head of policymakers and why. intent not even think they have a gun to their head that wouldn't involve something much more sophisticated this is simply you know you pay you a dime you take your ride on the on the wheel we're not a democracy in the united states at least not the way we used to be we're now oak or pretty and congress has been thoroughly rented and is now owns by the major banks in the united states and the big wall street houses when you look at the vast amount of lobbying dollars that are spent and the massive campaign
contributions the whole concept of government for the people by the people one man one vote that's a quaint ancient notion here in the united states we are now a government a representative government. that is sold to the highest bidder right put this done to head aspect seems that any time congress blocks at a request from the banks suddenly there's a crash we saw this with the hank paulson in two thousand and eight we've seen it tied to legislation and some flash crashes that have incurred a sense then but if you've got the ability through high frequency trading and algorithmic trading to direct a market one way or another if you're trying to coerce the government to do a certain policy and you can crash the market to make your point that's in a way of you know a financial gun to the head but low what you wrote something recently barrie about i guess a friend of yours or an associate wrote his take on the current state of climate change global warming how this affects investment and you know what the grown up
version of what's really happening and how we should kind of begin to take this on board in terms of how it affects investing and the future of finance going forward and of course your comment boards were flooded with lots and lots of folks who fit into what i call the. i'm in change denial camp so talk to me a little bit about. what you see going forward in this this theme and and why is there such resistance by the general public who is experiencing the crazy weather every single day why can't they put the pieces together understand that there is global warming going on and this is causing crazy a fax in the investment landscape and the global climate short well first the piece was written by jeremy grantham of g m o who the shop is in boston and london
he's just a very smart long standing guy who has looked at the world with with open eyes and is constantly looking for where are opportunities relative to what's going on in reality and he sees the change in what's happening with the climate as shifting what's going to be scarce and what's going to be valuable in the future so he's looking at things like farmlands and fresh water and fertilizer and things along those lines it's not malthusian it's not oh my god we're going to run out of everything it's really more of a hey everything is changing and those parts of the world that think that they're very fertile they may be less fertile in future years and when it comes to agriculture and other products like that the second part of your question why the denial by a large percentage of of. at least the vocal parts of the country i don't
think most people are denying that climate has changed over the past century you know if you think back to the one nine hundred fifty s. there was a pretty big movement by the tobacco companies to deny that smoking causes cancer and they paid people like john wayne who if memory serves eventually died of lung cancer and they would pay. doctors to do advertisements when i smoke i smoke lucky's the healthiest cigarette there was no real f.d.a. rules back then there were there were none of that and so there was a concerted effort to protect profits by misleading the public the technical term for that is agnew tala willfully distorting changing raising doubts about stuff that is not in doubt in order to influence policy the tobacco companies have done it and now when you see who's behind the global warming deniers it's
essentially big oil is paying for it and full disclosure we own a couple of oil companies we own sun trust and we own. this and a handful of others but the bottom line is that there are people who are getting big profits from the current status quo and they're very very reluctant to see anything ultimately change right so as a matter of fact the same front groups the same p.r. groups the same political organizations that were behind the prose moken propaganda in the fifty's were actually brought in to do the climate change denial today but ok barry ritholtz the site is right old stock um that's all the time for we have today thanks so much again for being on the casa report my pleasure thanks for having me max it's always fun talking to you oh writing and that's going to do it for this edition of the kaiser report with me max kaiser and stacy herbert and i thank my guest barry ritholtz if you want to send me an email please do so at kaiser reporting r t t v dot ru intellects on this and guys are saying bio.